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Flashcards in Chapter 8 Deck (13):
1

Two Allowance Methods Acceptable Under GAAP

1. -aging accounts receivable
-% of receivables or balance sheet approach

2.% of credit sales(not responsible for)

2

Adjusting entry for bad debt expense and allowances for bad debt

Dr: Bad Debt Expense
Cr: Allowance for Bad Debt

3

Synonyms for Bad Debt

-uncollectible accounts
-doubtful accounts

4

Bad Debt Expense

-tells us the estimated amount of accounts we think will be uncollectible related to this period's revenue and is on the income statement

5

The older the the invoice......

the more likely it is to be not collectible

6

Net Realizable Value=

Gross Accounts receivable minus allowance for bad debts

7

What type of expense is bad debt?

non cash expense

8

Principles of A/R management

-determine to whom to extend credit
-determine a payment period
-monitor collections
-evaluate liquidity of receivable
-accelerate cash receipts from customers

9

Accelerate cash receipts from customers and points

-offer credit terms 2/10, n30

-sell accounts receivable= selling notes receivable= discounting

-customers can use bank credit cards like VISA, MasterCard,Discover, american Express

10

Amount needed in the ending balance for the allowance for bad debt account

Amount in Account Receivable* %Uncollectible

11

The Journal Entry for Write-Off

Dr: Allowance for B/D
Cr: Accounts Receivable

12

Discuss the direct-write off method?

direct write off method is for taxes only
-it is not GAAP
-there will be a difference between net income on income statement and that on tax return

13

what is the formula for NRV?

accounts receivable
Less: allowance for B/D